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Range Fuels pilot plant in Colorado (AP/David Zalubowski)

Fueled again

Politics | Failed alternative energy company auctions off taxpayer-funded facility for just pennies on the dollar

Taxpayers lost money on another failed alternative energy company when an ethanol plant went on the auction block earlier this month, leaving the U.S. government and the state of Georgia holding the bag on $87 million in unpaid loans and wasted grants.

Colorado-based Range Fuels' plant in Soperton, Ga., which was supposed to turn wood chips into biofuel, sold for $5.1 million on Jan. 3, just 2 percent of the $225 million it cost to build the facility in 2007. And the plant's new owner, New Zealand-based biofuels company LanzaTech, is backed by the same investor who helped fund Range Fuels and lobbied the U.S. government for additional money.

Vinod Khosla, who made billions as co-founder of Sun Microsystems, helped Range Fuels secure a $43.6 million grant from the U.S. Department of Energy and an $80 million loan guarantee from the U.S. Department of Agriculture, of which the company received $42 million. He also persuaded the state of Georgia to pitch in $6.2 million. The money recouped at auction will go toward repaying the USDA loan.

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Justin DeJong, deputy director of communications for the USDA, said in a prepared statement that it was unusual for the agency to have such investments fail: "It's important to remember that USDA has a long history of successful lending that supports rural homeowners, business owners, utilities, and cooperatives, and over 90 percent of USDA's loans are successfully repaid."

The USDA Rural Development fund manages about a million loans with principal amounts that total about $160 billion.

Range Fuels is just one of several alternative energy companies that declared bankruptcy in 2011 after taking taxpayer money. Solar panel producer Solyndra, whose failure triggered a congressional investigation, defaulted on more than half a billion dollars in federal loan guarantees. Republicans criticized President Barack Obama and his administration for the Solyndra loans, but DeJong was quick to point out that Range Fuels received its grant when the Bush administration was in power.

When construction on the Range Fuels plant started in 2007, then-Georgia Gov. Sonny Perdue, a Republican, hailed the facility as an economic boon for Treutlen County, one of the state's poorest. As part of its agreement with the state, Range Fuels promised to create 70 jobs, positions that never materialized before the company declared bankruptcy in early 2011. In addition to state aide, county officials provided the company with 20 years of tax abatements and 97 acres on which to build the plant.

Lawyers working for the state are trying to figure out whether LanzaTech can be held accountable for Georgia's investment in the facility. State money paid for part of the plant's equipment, which belongs to taxpayers until the plant's owner meets the job creation and investment requirements spelled out in the grant. If LanzaTech is found liable, the state could force the company to repay the money, if it's still in business and hasn't met the grant's performance requirements by the time a "clawback" provision goes into effect in 2015.

Benita Dodd, vice president of the Georgia Public Policy Foundation, said taxpayers always lose when government tries to pick the winners and losers in business, particularly when it comes to renewable fuel companies. "What's happening with the renewable energy push is that we're not focusing on whether the sources are renewable and sustainable," she said.

Range Fuels planned to use a new and unproven process at the plant to create ethanol, but the facility never produced a drop of fuel. LanzaTech plans to use the plant to make biochemicals.

Leigh Jones
Leigh Jones

Leigh lives in Atlanta and is the managing editor of WORLD's website.

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